Malaysia Should Adopt Indonesia's Palm Oil Export Tax Regime, Says Expert

KUALA LUMPUR, March 8 (Bernama) -- Malaysia should adopt Indonesia's export tax regime or do away with the duty-free export quota for crude palm oil (CPO) in order to stay competitive, says Dorab Mistry, Godrej International Ltd director. Malaysia lost ground in the refinery industry as export orders shifted to Indonesia following the cut in export duties for refined palm oil and this has badly affected downstream players and this was a hot topic at the three-day Palm & Lauric Oils Conference & Exhibition 2012 which ended Wenesday. Mistry, a renowned vegetable oil analyst, said Indonesia's lower tax structure had affected the norms under which CPO prices on the Bursa Malaysia Derivatives (BMD) were determined. "As the saying goes, if you cannot beat them, join them," he said. He said traditionally, the global market would look at Malaysia's stocks of crude and refined palm oil to determine prices. "Now, as a result of the new export tax regime, Indonesia wins most of the business for refined palm products. "Interestingly, Malaysia appears to be still searching for a response to the Indonesian move and for the present, it has effectively asked its refiners to fend for themselves as well as released a normal duty-free export quota for CPO," he said. Malaysia has set the duty-free export quota for CPO at 3.6 million tonnes this year. Mistry said for Malaysia maintaining the tax-free export quota would be "a clever strategy" if it continued to release more quota from time to time, which could ensure high prices for CPO on BMD and increase CPO exports. "Overall, Malaysia will become a large CPO exporter and its smallholders, growers, settlers and plantation companies will be much better off than their Indonesian counterparts. "On the other hand, Malaysia's refining and oleochemical industry will go the way of its biodiesel plants," Mistry said. Meanwhile, chairman of LMC International, James Fry, said the prospects for Malaysian stocks were inextricably linked to events in Indonesia. "I believe that Malaysian refined oil exporters will have to concede market share to Indonesia and this will push more of the world stocks onto Malaysia," Fry said. -- BERNAMA